QUESTION:

Hi Martin–

Thank you for your daily blog. I read it first thing each morning.

Regarding the bank liquidity problems with the Eurozone banks: would it make sense to put assets in precious metals as a hedge against problems in the banking sector (i.e., getting capital out of the banks and into a safe harbor of sorts)? Do you see this liquidity problem impacting major brokerage houses in the U.S.?

Thank you

Jack

ANSWER: The only problem with precious metals is that governments are targeting the bullion industry, and by regulation they can also create a real nightmare from a liquidity perspective. They are targeting dealers and compelling them to report on their clients. There used to be a big international coin show in Paris. The government demanded the dealers report everyone who sold and bought at the show. They shut it down and moved. Back in 2015, France targeted gold coins, and they also targeted the ancient coin show in Paris. The French government forbid cash sales and they threatened dealers with fines and imprisonment for failure to report on buyers/sellers who were their clients. The major rare coin show in Paris left as dealers refused to comply with such reporting. The French were driving to Belgium to deal in gold and the French government was complaining about that.

While we could sell some coins from hoards to people who attended our conferences in the USA, we cannot bring such materials to Europe or even Canada. You will find that gold bullion will also get caught up in a liquidity crisis in Europe where you will be unable to sell it even if you have purchased it with cash after taxes. The hunt for taxation is really destroying the world economy. The best hedge is to have it outside of Europe. Even Singapore or Hong Kong is ok as long as you DO NOT have a bank with offices in Europe. They are fond of telling banks to turn over lists of clients who belong to their jurisdiction. Germany did that by paying bribes to Swiss bankers to expose lists of German citizens with accounts in Switzerland. Perhaps the best hedge is paper dollars that you hide someplace.

Gold will survive long-term. But don’t count on it being available during the period before the crash and burn.